Whitepapers

Commission and Commission Staff Issue Updates to Interpretive Guidance on Revenue Recognition

The Securities and Exchange Commission today issued two releases and the SEC staff released a Staff Accounting Bulletin to update interpretive guidance regarding revenue recognition.

Consistent with developments in private-sector accounting standard setting, the SEC issued a release to update its guidance for bill-and-hold arrangements by stating that registrants should no longer refer to the criteria in Accounting and Auditing Enforcement Release No. 108, In the Matter of Stewart Parness (AAER 108), to recognize revenue for such arrangements upon the registrants' adoption of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. The release states that until a registrant adopts ASC Topic 606, it should continue referring to ... Read More

Banca IMI Securities to Pay $35 Million for Improper Handling of ADRs in Continuing SEC Crackdown

The Securities and Exchange Commission today announced that broker Banca IMI Securities Corp. (BISC), an indirect, wholly-owned U.S. subsidiary of Italian bank Intesa Sanpaolo SpA, has agreed to pay more than $35 million to settle charges that it violated federal securities laws when it requested the issuance of and received American Depositary Receipts (ADRs) without possessing the underlying foreign shares.

ADRs are U.S. securities that represent shares of a foreign company, and for all issued ADRs there must be a corresponding number of foreign shares held in custody at a depositary bank.  Under “pre-release agreements,” brokers such as BISC may obtain ADRs without depositing corresponding foreign shares provided the broker owns or takes reasonable steps to determine that ... Read More

SEC Uncovers Wide-Reaching Insider Trading Scheme

The Securities and Exchange Commission today announced insider trading charges against seven individuals who generated millions in profits by trading on confidential information about dozens of impending mergers and acquisitions.  Data analysis allowed the SEC’s enforcement staff to uncover the illicit trading despite the traders’ alleged use of shell companies, code words, and an encrypted, self-destructing messaging application to evade detection.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today unsealed criminal charges against the same seven individuals.

According to the SEC’s complaint, Daniel Rivas, a former IT employee of a large bank, was at the center of the alleged scheme, misusing his access to a bank computer sys... Read More

SEC Charges KPMG with Audit Failures

The Securities and Exchange Commission today announced that KPMG has agreed to pay more than $6.2 million to settle charges that it failed to properly audit the financial statements of an oil and gas company, resulting in investors being misinformed about the energy company’s value.  KPMG’s engagement partner in charge of the audit also agreed to settle charges against him.

According to the SEC’s order, KPMG was hired as the outside auditor for Miller Energy Resources in 2011 and issued an unqualified audit report despite grossly overstated values for key oil and gas assets.  KPMG and the engagement partner John Riordan failed to properly assess the risks associated with accepting Miller Energy as a client and did not properly staff the audit, which overlooked the ov... Read More

SEC Files Charges in Oil Drilling Investment Scheme

The Securities and Exchange Commission today charged two Tennessee men and an accomplice in Fort Lauderdale with allegedly defrauding investors they lured by false promises of high returns from an oil drilling investment opportunity. According to the SEC’s complaint filed in federal court in Savannah, Georgia, David R. Greenlee and David A. Stewart Jr. orchestrated the $15 million scheme by recruiting and controlling a network of salesmen who offered and sold investors a stake in various companies purportedly using enhanced oil recovery techniques like fracking to extract and sell oil from wells in Kansas, Oklahoma, and Texas.  Investors were allegedly promised profits of 15 to 55 percent per year for decades. The SEC alleges that Greenlee and Stewart weren’t registered to sell in... Read More

SEC Staff Publishes Report on Access to Capital and Market Liquidity

The SEC Division of Economic and Risk Analysis (DERA) today published a report describing trends in primary securities issuance and secondary market liquidity, and assessing how those trends relate to post-crisis regulatory reforms. The report was requested by Congress as part of the FY2016 appropriations process.

The report includes a survey and analysis of recent academic literature, as well as original analyses drawn from publicly available databases and non-public regulatory filings. The report examines the issuance of debt, equity, and asset-backed securities, as well as activity and liquidity in U.S. Treasuries, corporate bonds, single-name credit default swaps, and bond funds. Specifically, the report identifies trends for unregistered offerings, such as those under Re... Read More

Investment Management Director David W. Grim to Leave SEC

The Securities and Exchange Commission today announced that David W. Grim, Director of the Division of Investment Management, will leave the agency next month after more than 20 years of public service. 

Mr. Grim, who joined the Division directly from law school and rose to become its leader, has left a legacy of regulatory policy reforms and legal guidance that have shaped the Division and the industry it regulates. He has also dedicated himself to developing the culture of collaboration and professional development that contributed to the Division ranking among the top places to work in the federal government. The Division oversees the $70 trillion dollar asset management industry, which includes mutual funds; exchange-traded funds; closed-end funds; variable insurance prod... Read More

Donna Esau Named Associate Regional Director for Examinations in Atlanta Regional Office

The Securities and Exchange Commission today announced the promotion of Donna Esau to Associate Regional Director for Examinations in the agency's Atlanta Regional Office.

Ms. Esau will direct a staff of approximately 40 accountants, examiners, and attorneys responsible for the examination of broker-dealers, investment companies, investment advisers, and transfer agents across five southeastern states (Alabama, Georgia, North Carolina, South Carolina, and Tennessee). She will assume her new post Aug. 6.

"Donna is a very strong and experienced leader and manager. She has excellent technical skills, and understands the firms and capital markets which we regulate. Donna also understands the risks faced by retail investors in our region," said Walter Jospin, Director of t... Read More

Overseas Stock Manipulator Settles SEC Charges

The Securities and Exchange Commission today announced that an overseas stock manipulator has agreed to pay nearly $800,000 and be permanently barred from involvement in penny stocks after hiding his significant stake in a small oil & gas company while secretly funding a fraudulent promotional campaign that artificially boosted the company’s stock price before he dumped his shares.

SEC enforcement investigators uncovered the fraud by peeling back layer upon layer of shell companies and nominee owners to reveal that Joe Yiu Cheung controlled United American Petroleum Corp. (UAPC).  According to the SEC’s order, Cheung utilized an elaborate network of overseas bank and brokerage accounts mostly in bank secrecy jurisdictions to conceal his UAPC ownership.  In addition, he did no... Read More

SEC Files Charges to Stop Fraudulent Misuse of Cancer-Fighting Investments to Fund Restaurant Businesses

The Securities and Exchange Commission today filed charges to stop an alleged ongoing fraud by a Massachusetts businessman misusing investments intended for the development of cancer diagnostic tests to instead pay personal expenses and fund his fiancée’s restaurant businesses. 

According to the SEC’s complaint, Patrick Muraca established two pharmaceutical development companies and raised nearly $1.2 million by representing to investors that their money would be used to develop products to detect cancer and other diseases.  The SEC has traced the flow of investor funds into Muraca’s personal bank account and alleges that at least $400,000 has been used to pay rent for the restaurants and fund other purchases by Muraca, including payments to a casino, automotive shop, and cig... Read More

SEC Files Fraud Charges Against Former Brokers Targeting Federal Retirees

The Securities and Exchange Commission today charged four former Atlanta-area brokers with fraudulently inducing federal employees to roll over holdings from their federal Thrift Savings Plan (TSP) retirement accounts into higher-fee, variable annuity products. 

The SEC’s enforcement action comes at a time when the agency has been focusing more specifically on brokers’ and advisers’ interactions with senior investors, and others investing for retirement, through the ReTIRE initiative of the agency’s national exam program and the work of the Broker-Dealer Task Force in its Enforcement Division.

The SEC’s complaint charges an entity called Federal Employee Benefits Counselors through which the brokers targeted federal employees nearing retirement with sizable funds inve... Read More

SEC Announces Whistleblower Award of More Than $1.7 Million

The Securities and Exchange Commission today announced a whistleblower award of more than $1.7 million to a company insider who provided the agency with critical information to help stop a fraud that would have otherwise been difficult to detect.  Millions of dollars were returned to harmed investors as a result of the SEC’s ensuing investigation and enforcement action. 

''When whistleblowers tip the SEC, it not only can bring wrongdoers to justice but also relief to investors,'' said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  ''This whistleblower's valuable information enabled us to stop further investor harm and ultimately return money to victims.'' 

Approximately $158 million has now been awarded to 46 whistleblowers who voluntarily provided the... Read More

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